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When businesses fall behind with mortgage payments or other loans, their banks will attempt to foreclose on the business’ property. If you’re facing foreclosure on your business property, you have some options – and your lender might be willing to work with you.
Business Property Foreclosure is Difficult
Business owners will go to great lengths to prevent foreclosure on their commercial real estate – and lenders know it. The legal system lets businesses fight back with defenses, or reasons why the court should not let lenders foreclose. This makes business foreclosure more difficult than residential.
Even when lenders are able to successfully foreclose on a commercial property, they often find themselves in possession of property that can’t easily be sold to someone else. There is a better market for residential than for commercial property. If the lender forecloses on your equipment, the resale market for this also can be limited.
Options in Commercial Property Foreclosure
Foreclosure on commercial property usually begins with the mortgage lender filing a complaint against the business in court. If the process has not yet gotten this far, and you haven’t yet received a complaint from your lender, you might be able to work out new loan terms to allow your business to catch up with your late payments. Your lender doesn’t want to foreclose – it just wants the money your business owes.
Commercial Foreclosures Take Time
Even if you have received a complaint for foreclosure, there is still some time to save your property. It can take eight or nine months before your lender schedules the sale of your building. In some states, the court lets you postpone the sale even further, giving you additional time to work things out. If you can raise the money, you can usually pay off the mortgage and save your property during this time.
Bankruptcy Might Be an Option
Chapter 11 bankruptcy allows businesses to keep their property while they pay their debts according to a court-approved plan. You can keep operating your business and your lenders can’t foreclose, as long as you keep up with your bankruptcy plan payments.
A Foreclosure Lawyer Can Help
The law surrounding foreclosures on commercial property is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a foreclosure lawyer.